Amazon is closing various in-house brands as part of a significant reduction of its private-label operation as it works to fend off antitrust scrutiny and shore up profit.
In the past year alone, the commerce giant has decided to eliminate 27 of its 30 clothing brands, such as Lark & Ro, Daily Ritual and Goodthreads. Some of the brands remain on Amazon’s site for now as the company sells off remaining inventory, but when completed its house-label clothing division will have just three brands: Amazon Essentials, Amazon Collection and Amazon Aware.
Exact numbers for brands being cut in other parts of the business couldn’t be learned, but Amazon Basics, which sells a range of home goods and tech accessories, will remain a focus for the company.
After years of trying to build the private-label business, Amazon began scaling it back last year following disappointing sales and criticism from lawmakers and others who said it could conflict with the company’s business selling other brands. The company also cut back on giving its private-label products a boost on search results pages in special placements.
Amazon’s private-label business had 243,000 products across 45 different house brands as of a company disclosure in 2020.
The Federal Trade Commission has been investigating Amazon over a number of its practices, and is preparing an antitrust lawsuit against the company. Amazon’s representatives are scheduled to meet with FTC commissioners next week as part of a formality often called “last rites” before the FTC drops its lawsuit next month.
Amazon has said private brands account for just 1% of the company’s total retail sales. Given the small size of the business relative to the regulatory issues it creates, the company last year discussed offering to exit from the business as a concession to the FTC if the agency followed through with its lawsuit, the Journal reported.
No new products are being ordered for the brands being phased out, which will cease to exist once their inventory is sold. Strong-selling items in brands that have been discontinued are being rebranded under Amazon Essentials or other remaining labels.
The private-label moves also address scrutiny of the competitive practices around its in-house brands that has vexed Amazon for years. In 2020, the Journal detailed how Amazon employees used data from its platform on individual third-party sellers to develop Amazon-branded products that compete with those sellers. Amazon founder and then-Chief Executive Jeff Bezos was called to testify before a Congressional antitrust committee following the article.
After that 2020 article, Amazon curbed a yearslong practice in which its own brands were given a boost in the search results on its site in special placements—the kind of edge other sellers could only gain by buying ads—according to the people familiar with the recent changes. That change caused many of Amazon’s brands to be buried in search results, making it harder for items to sell. The cost of warehousing all that inventory was significant for Amazon, making it a target during the cost cutting.